27 July 2012
One of my client, a Pvt. ltd. has revalued its assets and created revaluation reserve. Now it has sold its one asset earlier revalued. For clarity, let us assume, the book value originally was 100. revalued amount is 150. So revaluation reserve is 50. It was sold foe 180. it has recognized profit of Rs. 30 in p&l and the revaluation reserve was transferred to general reserve. Is the treatment proper as applicable AS, Guidance Note and Companies Act, 1956?
27 July 2012
Reversal of Revauation reserve is not disclosing the information ought to be disclosed. Profit on sale of asset is 80 and not 30. You need to credit profit on sale of asset as 80, corresponding debits would be asset account and reserve account.
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